Monday, January 7, 2013

Put aside the bearish target at 1606.40 for now although it will remain theoretically valid until such time as 1695.40 (aka 'point C') is exceeded to the upside.  My justification for this is the rally's leap on Friday well above the 1650.90 midpoint pivot associated with the target.  That leap can be seen as an abc pattern projecting to the well defined target at 1664.10 shown in the chart.  It will take a little more than that, however -- specifically, a print above the 1665.30 high shown, to refresh the bullish impulsiveness of the 15-minute chart.  That high could provide a juicy opportunity for camo traders seeking to get long, since a pullback from a tick or two above it would be read as a stall by the herd.  I've sketched the hypothetical trade in exacting detail for your further guidance. ______ UPDATE (11:55 a.m. EST): Gold's mild relapse has negated our strategy. However, camouflageurs could try bottom-fishing at either 1644.70 or 1637.40. They are, respectively, the p and d Hidden Pivots of the corrective pattern (on the 15-minute)  a=1657.30 (8:30 a.m. EST); b=1642.60, c=1652.10. You can learn to 'camouflage trade', and it's easier than you think. Click here for information about the upcoming Hidden Pivot Webinar.

Dow 20,000?  We seriously doubt it, although our good friend James Tolard explained why he thought it could happen in a guest commentary here last week. What were his reasons?  Okay, you’re having a little trouble remembering why he was so bullish. So are we. His arguments didn’t quite stick to our ribs. You may recall there was a lumber chart that accompanied the essay. What was that all about?  Well, Jim mentioned that rising lumber prices imply that the uptick in the housing sector is no fluke.  Our take is that the uptick is pretty feeble considering how many trillions of dollars the Fed has shot at the singular objective of inflating home prices. We think the housing mini-boom will end by mid-year, followed by a resumption of real estate deflation that eventually will reduce values to 30% of the peak valuations achieved in 2007. Jim also mentioned that big companies can borrow for practically nothing. While that may sound like a good thing, the bad news is that they have found little productive use for all of that cheap money.  Actually, the best reason they’ve been able to come up with for borrowing it is that they can.  Some companies are doing it even though they hold surplus cash of $10 billion or more. And why not?  It never hurts to have as much cash on hand as possible for that rainy day, right?  Our take is that the rainy day is not going to be quite what corporate treasurers are expecting.  While they are looking ahead to the next recession, we see a financial cataclysm taking shape that will turn U.S. corporations’ supposed $2 trillion surplus into digital fumes overnight. A Nutty Idea After all, It’s not as though the firms have stored this unused, and currently